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Selling a business is a bit like selling your home. You want to get the best price possible, with the least amount of effort and at the lowest cost to you. What you do need to be clear on are the reasons you want to sell, plus be 100% certain that a sale is the best option for you.

As accountants and business advisors, we regularly play a role in helping clients sell a business. We believe it is important to consult with professionals such as ourselves because selling a business is a specialist area. To demonstrate this, we are sharing some of the processes and knowledge required to achieve a successful, legal and profitable business sale.

What Are Your Reasons for Selling a Business?

There is most likely a lot of your blood, sweat and tears which have gone into your business. There is probably also a large amount of pride and emotional connections associated with it too. So, chances are that you have thought long and hard about whether or not selling your business is the right move for you.

The decision you have come to would have been based on one or more reasons, such as:

  • you are ready to retire
  • you don’t enjoy owning a business any more
  • there are health problems which are affecting your ability to manage your business
  • it is time for a change and you want to do something else
  • you want to release your equity locked within the business
  • there’s a financial downturn and you want to get out now
  • a partnership dispute is causing problems

It is always best though, to ensure that the one or more reasons for selling absolutely require the business to be sold by having a chat with us. For instance, a financial downturn can be beneficial for a business which can pivot and reach a new market. Or employees can be hired to assist when health problems force the owner to step back. If you are 100% clear about your decision, it’s time to move onto the next stage: collating all your paperwork!

Organising Your Paperwork When Selling a Business

It would be a fair assumption that one of the first things an owner considers when deciding to sell their business is what the purchase price should be. However, like with selling of anything, the purchase price cannot simply be plucked out of thin air. Instead it relies on having a solid understanding of and updated knowledge about the business first. This requires you to get all your paperwork in order, including:

  • up to date financial records for current and previous tax years, including profit and lost statements, personal drawings, balance sheets, and employee costs
  • list of assets
  • current business plan
  • supplier contracts are current
  • details about all leases
  • any debts the business has are paid in full or have a plan to be paid prior to the sale
  • any legal issues are resolved
  • all regulations and requirements are complete, including health and safety planning
  • full documentation of all business processes

Finally, you will need to prepare an information memorandum for potential buyers which include all the above items. It should also contain specific details about business growth opportunities and other pertinent information not included elsewhere.

If all of this sounds too challenging or you don’t have time or want to do it, we can help. Get in touch with us today and we can start planning the sale of your business. Next though, we’ll cover how to get a valuation for your business.

How Much is Your Business Worth?

Even if you chose to take the DIY option when selling your business, it is highly recommended that you have it valued professionally. After all, a business valuation completed incorrectly can cost you plenty of money!

When it comes to valuing a New Zealand business, there are three main methods:

  • asset valuation – when you calculate the total sum of assets on your balance sheet
  • market approach – the amount of earning potential your business has which is based upon the theoretical market demand
  • income valuation – projecting the future cashflows of your business

You’ll often find that there is a valuation calculation used too, known as EBITDA. EBITDA stands for Earnings Before Interest, Taxes, Depreciation and Amortisation. Generally, it is used to identify a business’ operating profit, but can be unreliable when a business is close to break-even.

Now we need to have a chat about price and value. We can help you identify the value of your business, which is taking into consideration the EBITDA, to know how much to ask for your business. However, the price of your business is the amount someone is willing to pay to buy it. Like with calculating its value, there are factors which can affect the price of your business, including:

  • physical presentation of your business
  • current economic climate
  • lifestyle the business provides
  • a comprehensive operating manual ready for an easy takeover
  • condition of fixed assets
  • existing restraints of trade
  • business name and trademarking
  • additional clauses in the sale and purchase agreements

Once you have finished the valuation of your business, it’s time to start looking for a buyer and we’re going to share some tips on doing this with you next.

Where to Find a Buyer When Selling a Business

When selling a property, most people use a real estate agent to help them find a buyer. When selling a business though, you’ve got a few other options up your sleeve. These include:

  • hiring a business broker – a business broker helps connect buyers and sellers, and they usually have an area of expertise. A broker is likely to have a database of buyers, as well as have a solid understanding of how to attract other potential buyers to consider purchasing your business. A broker can help you with the valuing and marketing of your business and expects a commission upon completion of the sale.
  • talking with employees – you may have a current employee who is interested in purchasing the business from you. Already knowing how the business is run is a huge bonus for them, and with some help from you, they may be willing to take the next step.
  • approaching your competitors – instead of having to compete with you, your competitors could buy your business out instead!
  • customers – do you have some raving fans of your business? They may be ready to purchase and run the business themselves.
  • advertising – put ads on social media, radio and even print media asking for interested parties to get in touch.

With interest from buyers comes negotiations and contracts. This is another area where professional expertise is recommended. From business advisors to lawyers, it is best to have everything completed by those who know what they are doing. Yes, they will charge you for their services, but the financial price you can end up paying for mistakes at this time can be far greater.

We’d like to offer you our experience and knowledge as professional accountants and business advisors when selling your business. We can walk you through the process, ensuring you receive the best possible price with the lowest possible amount of stress and costs. Get in touch with the team here at MBP Advisors and Accountants today and let’s meet up for a chat.

If you’re a small business owner whose company hasn’t gone through hard times, that’s great but it’s likely to happen at some point. As much as we dream about being brilliant enough at business that we’ll never face slow times, there are many things beyond our control that can negatively affect our business. How you go about managing the impacts of unexpected events and getting your business through tough times will set you and your business up for success for years to come.

Here are our top four tips for getting your business through tough times.

Focus on your Existing Customers

When companies go through tough times, many owners turn their focus to bringing in new business. The downside is that existing customers are often forgotten, but those are the most efficient people to make sales to. You don’t need to stop marketing yourself to new customers, but make sure you give extra focus to the customers you already have, to ensure they remain loyal. Find out what their current needs are, how successful you are at meeting them, and what you can do to maintain an ongoing relationship. Communicate with them, and always provide exceptional customer service.

Reach out to Others

Chances are, you aren’t the first person in your industry to experience tough times. Talk to other people who have been in similar situations to learn how they navigated those challenges. Ask them what did and didn’t work for them, and what they learned from the experience. Some—if not all—of their answers could be applicable to your business, or could at least inspire a solution.

If you need a chat, a sounding board or someone to run through ideas in tough times, reach out to the team at MBP. Regardless of whether you’re a client or not, you can book a free 30 minute chat with one of our team here.

Examine your Marketing Plan

Your marketing plan brings in new customers. Now is the time to consider fresh marketing ideas to bring in new revenue. Is there an area of your business you haven’t promoted before but could bring in clients? Is there a new way to market yourself you haven’t tried?

Examine previous marketing efforts to determine how successful they were. If they weren’t successful, stop wasting your valuable time and money on them. Use your efforts on something new.

Improve your Cashflow

Assess your company’s financial health to see if there are ways to improve cash flow. Can you charge clients a deposit or encourage payment up front to increase cashflow? Are there products you sell or services you provide that bring in revenue more quickly than others? Are there ways to save money that won’t hurt your business in the long run?

It can be tempting to eliminate staff, but when things are good you’ll just need to hire employees again. Doing so costs time and money. See if you can find small ways to save money that won’t negatively affect your business when it starts booming. Cutting overtime, for example, can save you money without losing staff.

Make sure you can account for every dollar your business spends. Don’t hide from creditors, communicate with them to find out if you can restructure your debt or extend your terms. Free up as much money as you can without setting yourself up for failure when things turn around.

Final Thoughts

Chances are your business will go through tough times at least once. It’s important you take action to help get you through it, rather than crossing your fingers and hoping the difficulties pass.

The steps you take during these challenging periods will help you, but they can also help set you up for increased success in later years.

Got a question? Please don’t hesitate to get in touch.

A business mentor can help you take your business to new heights: but only if you choose the right one. From offering advice, support and a listening ear, business mentors understand and really ‘get it’ when it comes to the struggles a business owner faces. Like everything though, all business mentors are different, with varying strengths, experiences and interests. Therefore, choosing the right business mentor becomes your first task in your search for business support.

What is a Business Mentor?

Business mentors are experienced business professionals who have made the decision to give back to newbie (or relatively new) business owners. They’ve been where you are now, understand the ups and downs of business life and want to help you develop your business.

A great business mentor will aim to:

  • Build a longterm relationship
  • Share their experience and knowledge
  • Support you
  • Offer new ways of doing and looking at things
  • Introduce you to their business network
  • Analyse where your business is now and identify where you want it to be
  • Help you clarify your business goals and objectives
  • Assist with business planning
  • Offer solutions to solve business-related problems
  • Provide constructive feedback

Many people have heard of Business Mentors New Zealand, which are a not-for-profit organisation which pairs up volunteer mentors with mentees. They work with clients throughout the country and it’s fair to say are the most well-known mentoring organisation. Many new or developing business owners have used their service with great success, but there are other options which can provide a service which is as good or even better.

Our team of business advisors can also provide business mentoring services. The benefit of choosing us is that we can provide a more in-depth and overarching service, including:

  • Working with you to write and assess your business plan
  • Help you to create your businesses core values
  • Improve your bookkeeping and accounting practices
  • Assist with an organisational review
  • KPI coaching
  • Business coaching services

Let’s now take a look at the reasons why you should work with a business mentor this year.

Why Should I Work With a Business Mentor?

A business mentor will not do the work for you. They’re not going to tell you what to do either, but rather make suggestions based upon their experiences and knowledge. This offers you plenty of benefits, including:

  • Reducing the level of risk you face when making decisions
  • Helping you focus your attention on the details which really matter
  • Challenging you to step outside of your comfort zone
  • Holding you accountable for your decisions by setting and following up on goals and milestones
  • Support you to leverage a range of networking opportunities
  • Being a sounding board for new and rehashed ideas
  • Helping you to step back and take another view of your business
  • Assist with understanding the legal and tax obligations of running a business
  • Providing a fresh perspective
  • Helping to implement business changes
  • Support with marketing ideas and implementation

A business mentor helps to stimulate new ideas and support you as you implement them. They are someone who really ‘gets’ what you are going through, having been there and done that themselves. Providing a service which cannot be offered by well-meaning friends and family, they are highly valuable business professionals – if you choose the right one.

Key Questions to Ask When Choosing a Business Mentor

When using the Business Mentors New Zealand service, you are matched with a mentor of their choosing, not yours. While this can and has worked successfully in the past, it doesn’t always. Other than the application fee, their service is free though, which is a big plus.

On the other hand, when you have the option to choose between different mentors or different companies which offer mentoring services, you hold the power. You are able to pick a mentor who has the specific skills needed within your industry and has a personality you feel comfortable working with.  You’ll also have more say in what areas you receive help with, when and where you meet, as well as choosing the level of support and assistance you require.

Therefore choosing a mentor can be a bit like holding an interview. You want to do enough research before you approach them to ensure they will potentially meet your needs, as well as ask questions to them directly. Some of the key questions to ask a potential business mentor include:

  • What is something you wish you should have done differently? Why?
  • What used to be your biggest weakness?
  • What are you most proud of?
  • How do you stay connected within your industry?
  • What could you offer me and my business?
  • What type of communication would you prefer we used?
  • How would you move my business to the next level?
  • How do you rebound from failure?
  • What did you like best when you were just starting out in business?
  • Where do you find inspiration from?
  • How do you balance work and home life?
  • What key values do you hold close?

The answers to these questions will help you gauge more of an understanding of who they are and what they can offer. That way you can pick the mentor who is the best fit for you and your business.

Tips On Finding the Best Business Mentor for You & Your Business

A great business mentor will be around for a while, making spending time picking the right one well worth your time. To help you select the best possible mentor, here are some tips to help you:

  • Be sure you understand the role of a business mentor – know that they will be able to support and provide direction to you, but will not do the work for you.
  • Take time to find the right one – it is well worth spending time researching and then interviewing prospective mentors. Feeling comfortable with your decision is vital, as you will relying on their advice and skills. Make sure you feel you can trust them.
  • Choose a compatible person – this will be someone with similar values to you, who you are happy to work with, find their personality works well with yours and is totally committed to building a positive working relationship to help your business succeed.

Then let’s talk money. If you are paying for the services of a business mentor or advisor, understand what the costs will be. Are you charged per hour, meeting, month or each time you contact them? If you are signing a contract, be sure to check out the clauses regarding the cessation of services too.

Our team provides business development services to people like you all throughout New Zealand. Whether you want to visit our Taupo office, fill up our email inboxes or meet regularly online, we’ll work in whatever ways suit you best.  Get in touch with us now and together we’ll help you move your business to where you want it to be.

How will you get the money out of your business when it’s time for you to move on? A business exit strategy will give you the knowledge in advance of how you will wrap up your involvement in your business. It can also help increase the amount of money you will be able to recoup too.

No one has a crystal ball and we can’t see what the future will hold. There are many reasons why you may need to leave your business, including health, family, a need for money, a change in interests and retirement.

Developing an exit strategy includes the creation of a detailed plan which identifies the steps to be done for you to leave your business. To identify the most suitable exit strategies for your business, an assessment of both you and your business should be done, along with a review of the implications the strategies would have.  This then provides you with a documented plan which states what the options are, the pros and cons of each and the amount of cash you could expect with each option.

Regardless of the length of time your business has been operating, the creation of a business exit strategy is a must. In this article, we will explain the benefits of having a strategy, what your options are and how to develop an appropriate strategy for your business.

What Are the Benefits of Having a Business Exit Strategy?

The benefits of having a strategy in place to exit your business include:

  • You can mould your business into the best shape for your chosen exit option. This will give you the best possible value from it.
  • It allows you to groom successors from within the business to make the transition flow smoothly for everyone.
  • You can leave the business at a time which suits you and when the market conditions are advantageous.
  • A protection plan for your financial assets will be in place.
  • The value of your business remains protected and buyers see this as a positive feature.
  • Informing strategic decision making by keeping the end goal in site.

You’ve worked hard to build your business, so why not do everything you can to protect your investment? Next, we’ll look at some exit strategy options you can choose from.

What Are My Business Exit Strategy Options?

To develop the most appropriate exit strategy for your business, you need to lay all of your options on the table first. To maximise the value of your business, your chosen strategy must be flexible and appropriate to meet your needs and requirements. Your options include:

  • Liquidation – basically this is the closing of your business and selling all of its assets. For many small businesses, this is often the only option. The advantages are that it can be done quickly and easily, with the biggest disadvantage being that you’ll receive only a low return on investment.
  • Merger or Acquisition – your business is purchased by a larger company who then merges it into their operations. Advantages are that it is highly beneficial for the purchasing company, and that you are likely to receive a fair sale price.
  • Initial Public Offering – this is when you sell your shares in the business to the general public. It requires a lot of pre-work to get this up and running.
  • Passing to Family Members – your business is kept in the family, and you are able to groom your family successor. You also may still retain a say in what happens with the business too. However, it’s easy for families to fight over the ownership and management of the business, and they may not even want it.
  • Selling to Employees – you may have a manager or a group of employees who would like to purchase your business.
  • Selling to an outside buyer – you could advertise and sell your business to someone who is not currently connected to it.

This then leads to the question; what should you do next?

Creating Your Business Exit Strategy

We recommend having a chat with us before you develop your exit strategy. Not only can we assist with a valuation of your business, but we can also help you identify the key data you need to collect to make the best possible decision.

This can include collecting information about:

  • Appearance of premises
  • Condition of assets including machinery and software
  • Accounting systems are current and appropriate
  • Customer files are up to date and easily accessible
  • Policies and procedures are documented
  • Employees are fully trained and efficient

You will also need to consider:

  • Who your target buyer is and where you will find them
  • How long you are prepared to allow the leaving process to be when it’s time for you to get out
  • You have at least two years of financial records available to share with the purchaser. You should also be prepared to answer questions regarding your expenses, revenue and historical cashflow.
  • That your business can run without you being there. This may mean training up employees and stepping back from your role, as well as having regularly reviewed written processes for employees to follow. Aim to step back at least several months before the planned exit
  • The value of your business as it stands, and what improvements you could make which would increase its value
  • How you will promote your business to buyers, also known as your sales pitch
  • What your family’s wishes are, if you are considering creating a succession plan for them to take over the business
  • Goals for your business in the future, including what your role will be and when you want to leave the business. Do you want to remain a stakeholder and continue to have a say in how the business will run? Or is a great financial exit more appropriate for you?
  • When is the optimal time to leave your business? This can include data regarding the historic revenue of your business, periods of growth and busy times of the year.
  • That your website is updated, easily modifiable and you can arrange training for the new owner.
  • All debts must be paid in full and any existing personal finances removed from the business.
  • All outstanding invoices are paid in full.
  • Non-core assets are sold off and the business is streamlined.

As business advisors and accountants, we can help with the creation and documentation of your exit strategy. We’re only too happy to help; get in touch with us today.